Mario Cattaneo, 67, killed the burglar with a single shot from his hunting rifle early on Friday after hearing intruders breaking into his restaurant.
They apparently had the intention of stealing cigarettes from the adjacent tobacconist, according to police cited by Italian media.
A magistrate has placed the owner of the “Osteria dei Amis” in Gugnano near Milan under formal investigation on suspicion of committing a crime which carries a minimum prison term of 21 years.
It sparked howls of outrage from right-wing politicians.
Maurizio Gasparri, a close ally of Silvio Berlusconi, launched an appeal for funds to pay the restaurateur's legal bills. Regional president Roberto Maroni said: “It's the world turned upside down.”
Northern League leader Matteo Salvini called for a change in the law to ensure self-defence could automatically be invoked in such cases.
“A death is always terrible news but if this young man had gone to work instead of out robbing he would be alive today,” Salvini wrote on his Facebook page.
Italian law does provide for homicide charges to be reduced if a killer is deemed to have acted in legitimate defence, which usually requires the accused to show they had reasonable grounds to fear for their own life.
The circumstances of the latest episode were unclear.
The victim had been shot in the back and his body was found some 100 metres (320 feet) from the property. The owner told police his gun had gone off in a scuffle after the dead man tried to grab it from him.
The dead man could not be identified immediately because there were no identity papers on him and police did not have his fingerprints on file.